Competition and product cycles with non-diversifiable risk |
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Authors: | Tapio Palokangas |
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Institution: | (1) Department of Economics, University of Helsinki, P.O. Box 17, Arkadiankatu 7, Helsinki, 00014, Finland |
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Abstract: | This paper analyzes the growth effects of competition in a product-cycle model with innovation, imitation and non-diversifiable
risk. Imitation leads to oligopolistic competition and innovation restores a monopoly in the market. In contrast to the models
that assume diversifiable risk, this paper shows the following. Positive profits in the oligopoly stages of the product cycle
are necessary for technological change. A little intensity of competition is growth diminishing. Only if the intensity of
competition exceeds a critical level, its increase enhances growth.
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Keywords: | imitation competition product cycles |
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